What happened
Brent crude, the global benchmark for oil, traded near 88 dollars a barrel on Monday 20 July, up more than 12 percent over the past month, after Iran said its ceasefire with the United States had effectively collapsed and reported intercepting four vessels transiting the Strait of Hormuz.
The price opened at 88.19 dollars and dipped slightly during the day to 87.72, down 0.4 percent, but the direction over recent weeks has been firmly upward. Brent is now about 27 percent higher than it was a year ago.
The moves are being driven almost entirely by geopolitics rather than by everyday supply and demand. A collapsed ceasefire, Iranian retaliation on several fronts, near-halted shipping through Hormuz and continued supply restraint from the OPEC+ group of producing nations have combined to keep prices high.
It could have been worse. Earlier in the year Brent spiked to 126 dollars a barrel at the peak of the crisis, so the current level, while elevated, is well below the panic highs.
Why it matters
Oil is the raw material behind an enormous slice of the economy, from the petrol in a car to the cost of shipping goods to the fertiliser used to grow food. When it rises, the extra cost works its way into almost everything with a lag of a few weeks to a few months.
That makes expensive oil one of the surest ways to push inflation back up just as it was starting to settle. Central banks watch energy prices closely because a sustained oil shock can force them to keep interest rates higher for longer.
For households the link is direct and quick. Higher crude prices show up at the petrol pump within weeks and in heating bills over the following months, eating into money families would otherwise spend or save.
Explained simply
Think of the Strait of Hormuz as a single narrow doorway through which a fifth of the world oil must squeeze each day — any jostling in that doorway sends prices jumping across the whole planet.
The Strait of Hormuz is a thin stretch of water between Iran and the Arabian Peninsula. Roughly one fifth of the world seaborne oil passes through it, which makes it the single most important choke point in the global energy system.
When ships can pass freely, oil flows and prices stay calm. But when there is a risk that tankers could be blocked, seized or attacked, buyers rush to secure supplies and are willing to pay more, so the price climbs even if not a single barrel has actually been lost.
This is why a conflict thousands of miles away can change the number on a petrol station forecourt in Britain. Oil is a global market, and a threat to supply anywhere lifts the price everywhere at once.
The reverse is also true. When tensions ease, the fear premium drains away and prices can fall just as quickly, which is what happened when Brent slid back from its 126 dollar peak earlier in the year.
What it means for you
The most immediate effect is at the pump. When Brent trades in the high 80s, UK petrol prices tend to sit well above 1.40 pounds a litre, and further rises in crude would push the cost of filling a typical family car up by several pounds each visit.
Heating and energy bills follow with a longer delay, because wholesale gas prices often move alongside oil and feed into the energy price cap set for households. A sustained oil shock raises the risk that the cap climbs again at its next review.
There is a silver lining for some investors. FTSE 100 energy majors such as BP and Shell earn more when oil is expensive, so anyone holding a UK index tracker or a pension weighted toward the London market gets a partial hedge against pricier fuel.
For most people, though, the practical response is budgeting. If you drive a lot or heat a large home, it is worth assuming energy costs stay elevated through the autumn rather than betting on a quick fall.
The bigger picture
Oil has swung violently in 2026, from a 126 dollar spike to a sharp retreat and now back up toward 88 dollars. That volatility reflects a market held hostage by events in the Middle East rather than by the underlying balance of supply and demand.
The key thing to watch is Hormuz. As long as shipping through the strait is threatened, prices will carry a fear premium. Any genuine ceasefire, or a decision by OPEC+ to pump more oil, could bring prices down quickly and ease the pressure on inflation.